Abstract Many crystalline materials have interesting properties, both scientifically and technologically, which are related to the detailed magnetic and crystalline structures on a local scale. Recent advances in e.g., GMR (Giant Magnetoresistance) materials, indicate an intimate coupling of the local spin structure to the conduction properties. However, almost all diffraction work on these and related materials concentrate on the long-range crystal and magnetic structures. Only a few studies of the local order have been performed and these have not simultaneously considered magnetic and atomic scattering. We have therefore developed a new reverse Monte Carlo (RMC) method for modeling both lattice and magnetic disorder in powder crystalline materials by direct calculation of the structure factor. The method, and results from modeling test data on the lattice and magnetic structure of MnO around the Néel temperature are presented. The prospects for modeling GMR materials are good.